**Two of the world’s biggest mining companies have agreed landmark deals with Asian steel mills to buy iron ore on short-term contracts.**The deals mark the end of annual fixed-price contracts that have formed the basis for pricing in the steel industry for decades.
Vale and BHP Billiton said the new system was fairer and more transparent.
On Monday, four executives of rival miner Rio Tinto were jailed for bribery during iron ore pricing negotiations.
‘Relic’
“BHP Billiton today announced that it had reached agreement with a significant number of customers throughout Asia to move existing iron ore contracts that were previously priced annually onto a shorter-term basis,” the miner said.
The old system caused friction between steel mills and miners, as one would invariably lose out as the price of iron ore fluctuated away from the fixed price.
Pedro Gutemburg at Vale said: “The old system generates never-ending confrontations between buyers and sellers.”
Analysts said other top miners were likely to follow BHP and Vale’s lead.
“Annual prices are a relic of the past,” said Tim Schroeders at Pengana Capital.
“In today’s environment, you need to be able to adjust to the market reality a lot quicker than on an annual basis.”
Iron ore is one of the main ingredients used to make steel. This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.